A recent, albeit modest, pullback in shares of Bloomsbury Publishing PLC (LSE:BMY), the house that's home to best-selling authors Sarah J Maas and JK Rowling, should be seen as an attractive entry point for prospective investors new to the story.
This is the conclusion of Investec, which penned a note in praise of the group (and its prospects) in the aftermath of the company's interims.
Bloomsbury's consumer business remains robust and its digital resources division is well-positioned to capture long-term growth in academic publishing, the bank concluded.
With a growing cash pile supporting potential future acquisitions and its recent inclusion in the FTSE 250, the company should gain further investor interest, Investec added.
Making up lost ground
On Thursday, the shares recouped most of the ground lost since the end of August after the group said its full-year results are expected to surpass market forecasts, following a strong first-half performance and robust trading in September and October.
For the six months ending August 31, revenue rose 32% to £179.8 million, while profit increased 50% to £26.6 million. This marks the fifth consecutive period of double-digit growth, driven by Bloomsbury's "2030 vision" strategy.
The consumer division led the way with a 47% revenue rise, fuelled by the popularity of fantasy fiction, including a 102% sales boost for Sarah J. Maas' books.
The academic division was strengthened by the acquisition of Rowman & Littlefield, which contributed £7.2 million in revenue. The interim dividend increased by 5%.
Profits upgraded
Singer Capital Markets, in a note entitled 'Quality Delivers', hailed "another excellent set of numbers" and said it is anticipating adjusted profit before tax (PBT) upgrades of around 5% on average across the City.
Research firm h2 Radnor was in sync with this view as it raised its revenue and PBT numbers by 6% and 5% respectively. "Bloomsbury’s valuation is undemanding in the context of the strength of the track record, cash generation and potential for further upgrades," it noted.
So, where to now for the shares? Notwithstanding the late summer/autumn blip, the stock has advanced almost 90% over the last 12 months and 190% over the last five years.
On that basis, you'd think the potential of the Bloomsbury business had been fully priced. However, the company's fan club thinks there's further upside to the current price of 735p, which values the business at £600 million.
Further upside?
Investec reckons the stock is worth 800p, while Singers has 780p target.
The former noted that Bloomsbury’s stock trades at around nine times estimated earnings (EBITDA) for 2025, a valuation they believe is still in bargain territory given the company's potential for consensus upgrades, resilient profit growth, and its unique position as a listed publisher.
"We believe this [the valuation] is too low given the scope for consensus upgrades over time, the resilience of profit growth and the scarcity value of this unique listed equity story," said Investec.
"We continue to see significant upside – hence Bloomsbury remains a key sector pick."